Former Factor 5 staff suing the bankrupt company for fraud

A group of former staff members who worked for Factor 5 are suing the firm for fraud, claiming the founders moved assets before filing for bankruptcy.

The ex-staffers claim the money was moved to avoid paying employees and that Factor 5 stopped paying employees on November 1, 2008, before letting them go “with little or no notice” on December 19.

“We allege in the suit that Factor 5 and its three founders fraudulently transferred assets, including source code and other intellectual property to Blue Harvest, which is now known as White Harvest,” said James Smith, a lawyer representing the employees.

“We believe and have alleged in the complaint that Factor 5 and White Harvest are essentially the same company, being run by the same people, being represented by the same sets of lawyers, with all the same management and ownership and control, performing all the same work that they were doing at Factor 5, just now with a new name and a new address.”

After filing for Chapter 7, the Lair developer closed shop last month with up to $100,000 in assets and $10 million in debt with 69 claims for unpaid wages totaling more than $900,000.